Petition for Writ of Certiorari — DCS Sanitation Management Management Management, Inc. v. Castillo (No. 06-27)

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Supreme ( Court U.S.

1) FIL

06-277 JUN3 0 2006

OFFICE OF THE CLERK

REARS

In the

- Supreme Court of the Cnited States

DCS SANITATION MANAGEMENT, INC.,

Petitioner,

ELOY CASTILLO, EFREN GEORGE

CASTILLO, and ADOLFO MARTINEZ,

Respondents.

On Petition for a Writ of Certiorari to the United

States Court of Appeals for the Eighth Circuit

PETITION FOR WRIT OF CERTIORARI

JAMES F. McCarthy, III

Counsel of Record

Brapb_ey G. Haas

JEROME BisHopP

KATz, TELLER, BRANT & HILD

255 E. 57x Street, Surre 2400

Cincinnati, OH 45202

(513) 721-4532 -

Counsel for Petitioner

Becker Galiagher Legal Publishing, Inc. 800.890.5001

Questions Presented

Whether a multistate employer, who has contracted for a

particular rule of law to govern its employment agreements to

promote stability, reliability and certainty among its

employees and to protect its investment, training, and

goodwill, has constitutionally protected rights to have that

chosen law be given effect when there is a reasonable basis

for that choice?

Whether the parochial interests of the forum state must

yield to the reasonable and justifiable expectations of a

multistate employer to have its choice of law and the

particular substantive rule of that chosen law govern its

employment agreements with its employees located in

multiple states when there is a reasonable basis for the choice

of law?

In dealing with contracts involving interstate commerce,

whether the Constitution mandates a uniform rule requiring a

forum court to apply the parties’ reasonable choice of a

particular state law to govern their contract in order to realize

their reasonable and justifiable expectations?

Statement Pursuant to Supreme Court Rule 29.6

Petitioner DCS Sanitation Management, Inc. is a privately

owned entity. It has no parent corporation and there is no

publicly held company that owns 10% or more of its stock.

see

Table of Contents

I 8 ne dw aca ose wee

Statement Pursuant to S. Ct. Rule 29.6 ..........

PN ni i a en te ae ee

Noe ee re ee er

NP fo ra ee mn a a ag lee eae

SS orca de eee Lk eee ee Rene

Constitutional Provisions Involved .............

NS OE NS ea on coe eh is ew hes Ho ER

seneomnent of Pestinet Facts... ....c.ccccewevs

A. DCS as a multistate employer with its principal

place of business in Cincinnati, Ohio. ......

B. Packers assumes responsibility for cleaning

Plant with DCS’ proprietary information and

REET IES EID De RIOR Den AS AOS Rep

Reasons for Granting the Petition ..............

RP Ry INRA EAL la Bie Meets Le OEE

Appendix

Appendix A:4/4/06 Eighth Circuit Order denying

Petition for Rehearing En Banc and Petition for

Rehearing

eS oe. Se ae ee ee Ce Se. Cee Wwe 6. eS Se Oe COO ee ee

Appendix B:1/25/06 Eighth Circuit Opinion ........

Appendix C: 12/14/04 District Court Decision

PE otic pen eu actrees Gis pp ae whee

Appendix D: 6/23/93 DCS Sanitation Management

Inc. Agreement

ay oe Fe oe SS ee ee eo le ee ee? ee ew or ee ee ey I Oe er ee Oe

Appendix E: Constitutional Provisions Involved

Table of Authorities

Cases

Allstate Insurance Co. v. Hague,

ics oR bt) er re

Aultman Hospital Assn. v. Hospital Care Corp.,

46 Ohio St. 3d 51, 544 N.E.2d 920 (1989)

Barnes Group, Inc. v. C & C Producers, Inc.,

716 F.2d 1023 (4" Cir. 1983) .........

Carnival Cruise Lines, Inc. v. Shute,

et sae, RE 6's Sees Gee ee a N's

Clay v. Sun Insurance Office, Lid.,

DETR BOP EE i 08 oa where ess

Curtis 1000, Inc. v. Suess,

y Fe 8 Oks, Lo A). | re

Ecolab, Inc. v. Morisett,

S79 F.2d 325 (Sth Cw. 1969) .........

Ferrofluidics Corp. v. Advanced Vacuum

Components, Inc..,

968 F.2d 1463 (ist Cir. 1992) .........

Harper v. Silva,

224 Neb. 645, 399 N.W.2d 826 (1987) ...

Home Ins. Co. v. Dick,

Re a ON iy see wi

Inacom Corp. v. Sears, Roebuck & Co..,

2o4 F.30 GES Gah Cir, ZOD) wn cee 18, 19

John Hancock Mutual Life Ins. Co. v. Yates,

Soe Os APP a RRO eS Ae 8

Keener v. Convergys Corp..,

205 F. Supp. 2d 1374 (S.D. Ga. 2002)

aff'd in part and rev'd in part

poem Gy gts) oe oy) nearer of

Kruzits v. Visco,

ae Fae oe COR Fe bv ica ace ee on 20

Lake Land Emp. Group of Akron v. Columber, 7

101 Ohio St. 3d 242, 804 N.E.2d 27 (2004) ...... 18

Mertz v. Pharmacists Mutual Ins. Co.,

261 Neb. 704, 625 N.W.2d 197 (2001) ......... 18

Milwaukee County v White Co.,

Be a ee es Eee eee ees 13

Nevada v. Hall, 440 U.S. 410 (1979) ............ 17

Order of United Commercial Travelers v. Wolfe,

Dek ie EE ig eo oS Os ewe 16, 17

Par 3, Inc. v. Livingston,

268 Neb. 636, 686 N.W.2d 369 (2004) ......... 18

Philip G. Johnson & Co. v. Salmen,

211 Neb. 123, 317 N.W.2d 900 (1982) ......... 18

Vii

Raimond v. Van Vlera

42 Ohio St. 2d 21, - >. N.E.2d 544 (1975) ...... 8

Securities Acceptance Corp. v. Brown,

171 Neb. 406, 106 N.W.2d 456 (1960) ......... 18

Stewart Organization, Inc. v. Ricoh Corp.,

487 U.S. 22 (1988)... 6.62. ee eee eee yee 2

T.V. Transmission v. City of Lincoln,

220 Neb. 887, 374 N.W.2d 49 (1990) ......... 18

Thomas v. Washington Gas Light Co.,

ae ree Pee eae ys 13, 22

Watson v. Employers Liability Assurance Corp.,

eT i RE Fo a i 5 AS Se 8 a ES 12

Woodling v. The Garret Corp.,

Sao F.20 ooo Come CM. ISB)... 0 een 20, 21

Statutes and Rules

Restatement of Conflict of Laws 2d §2 ........... 6

Restatement of Conflict of Laws 2d § 187 ...... passim

Articles

D. Benson, National Forum Shopping Restrictive

Covenants, Bloomberg Corporate L. Journal 91 (2006) . 14

D. Benson, et al., “New Race to Tennessee and

Georgia Courthouses Over Non-Competition

Agreements”, 41 Tenn. Bar J. 18 (2005) .......... 14

Vill

D, Laycock, Equal Citizens of Equal and Territorial

States: The Constitutional Foundations of Choice of

Law, 92 Columbia L. Rev. 249 (1992) ......... passim

M. Cheskin, “Employment law when distance is no

object”, Midwest Construction Law

@ midwestconstructionlaw.com (2006) ........ 13, 14

PETITION FOR WRIT OF CERTIORARI

Petitioner DCS Sanitation Management, Inc. (“DCS”)

respectfully petitions for writ of certiorari to review the

judgment of the United States Court of Appeals for the Eighth

Circuit.

Opinions Below

The opinion of the United States Court of Appeals for the

Eighth Circuit dated January 25, 2006 is officially reported at

435 F.3d 892 and is reproduced at App. B. The ruling of the

United States Court of Appeals for the Eighth Circuit denying

the Petition for Rehearing En Banc and the Petition for

Rehearing dated April 4, 2006 is not officially — and

is reproduced at App. A.

The decision and order of the United States District Court

for the District of Nebraska dated December 14, 2004 is not

officially reported and is reproduced at App. C.

Jurisdiction

This petition is timely under 28 U.S.C. §2101 and

Supreme Court Rule 13.1 because it is being filed within 90

days of the entry of the order denying the Petition for

Rehearing En Banc and the Petition for Rehearing. This

court has jurisdiction to review the order of the United States

Court of Appeals for the Eighth Circuit pursuant to 28 U.S.C.

§1254.

Constitutional Provisions Involved

The relevant constitutional provisions are Article I,

Section 8; Article I, Section 10, Article IV, Section 1 and

Section 1 of the Fourteenth Amendment of the United States

Constitution. The relevant constitional provisions are

reproduced at App. E.

Statement of the Case

Statement of the Pertinent Facts

A. DCS as a multistate employer with its principal place

of business in Cincinnati, Ohio.

As a Delaware corporation employing thousands of

employees from Oregon to New York in the highly

competitive business of sanitizing food packing and

processing plants, DCS must direct, plan, coordinate and

implement its operations from its corporate headquarters in

Cincinnati, Ohio. With far-flung operations in an industry

requiring strict adherence to multiple regulations,

implementation of efficient and proficient protocols to

complete timely sanitation of multiple plants and precise

administration of chemical processes to realize required levels

of decontamination, DCS must promulgate uniform and

consistent policies, procedures and protocols to all of its

employees. Those personnel policies, sanitation procedures

and industry protocols are trade secrets and confidential,

proprietary information promulgated from DCS’ corporate

offices in Cincinnati, Oh’. From those corporate

headquarters, DCS has exported its trade secrets and

proprietary information to its employees in the various states,

including Nebraska.

To protect its proprietary information, investment,

training and goodwill which it created in Ohio and exported

to its employees throughout the United States, DCS had its

employees, including. the respondents (the “Former

Employees”), sign employment agreements (the

“Employment Agreements”) as a condition of employment.

A copy of such an agreement is reproduced at App. D.

Pursuant to the Employment Agreements, the Former

Employees, like all of DCS’ employees, covenanted and

agreed in part:

4. Noncompetition After Termination: For a period

of one (1) year following the date of termination of

employment for any reason, | will not directly or

indirectly engage in, or in any manner be concerned

with or employed by any person, firm, or corporation

in competition with Company or engaged in providing

contract cleaning services within a radius of one-

hundred (100) miles of any customer of Company or

with any customer or client of Company ***. In the

event of violation of this covenant, Company, in

addition to any other rights and remedies available at

law or otherwise, is entitled to an injunction to be

issued by a court of competent jurisdiction enjoining

and restraining employee from committing any

violation of this provision and employee hereby

consents to the issuance of the injunction.

The covenants contained in those Employment

Agreements are necessary to protect the legitimate business

interests of DCS, including maintaining and protecting the

confidential, proprietary information of DCS, the investment

in the training of the Former Employees and preservation of

the goodwill developed with DCS’ customers.

Recognizing that the Employment Agreements were

intended to protect DCS’ legitimate business interests, in

particular the substantial investment made in creating the

trade secrets, proprietary business information and goodwill

made available during their employment, DCS included the

provision that the terms of the Employment Agreements

would be “subject to and interpreted in accordance with the

laws of the State of Ohio”. This single provision in all of

DCS’ employment agreements embodied the benefits of

uniformity, certainty and predictability in the rights and

benefits of both parties to that bilateral contract. This single

provision allowed DCS to trust its employees and work

together to expand output and competition in interstate

commerce.

B. Packers assumes responsibility for cleaning Plant with

DCS’ proprietary information and investment.

For 18 years, DCS cleaned the processing side of the

Tyson Foods plant in Dakota City, Nebraska (the “Plant”).

In June, 2003, Tyson Foods solicited bids from competitors

to clean the processing side of the Plant. On September 18,

2003, Tyson Foods elected not to renew DCS’ contract and

chose Packers Sanitation Services, Inc. (“Packers”) to clean ~

the Plant commencing November 7, 2003. On November 8,

2003, Packers began cleaning the processing side of the Plant.

Rather than recruit and assemble its own crew, Packers

hired all of DCS’ employees, including the Former

Employees. With the hiring of the entire DCS crew,

including the Former Employees, an uncommon experience

in this industry, Packers was able to realize significant cost

savings and efficiencies and provide quality, uninterrupted

service without experiencing the usual disruptions

accompanying cleaning a new plant. With DCS’ trained

senior managers in the exact positions they had held for more

than 15 years, Packers could take advantage of the

knowledge, skill, training and investment that DCS had made

and minimize the risk of damaging the goodwill with the

customer. As Packers’ personnel manager readily conceded,

the real advantage to hiring the senior management are the

available efficiencies and the cost savings. “It, simply,

shortens the learning curve and reduces costs.”

C. The Decisions Below

The clear and unambiguous choice of .aw provision in the

Employment Agreements expressed the parties’ intentions to

have post-employment obligations construed, interpreted and

applied in accordance with Ohio law. In multistate

transactions the justified expectations of the parties to foretell

with accuracy their rights and liabilities under the contract is

best attained by letting the parties choose the law to govern

the validity of the contract and the rights created thereby. In

this way, certainty and predictability of result are most likely

to be secured. Giving parties this power of choice is also

~ consistent with the fact that, in contrast to other areas of law,

persons are free within broad limits to determine the nature of

the contractual obligations. However, the district court

permitted perceived parochial interests to eviscerate the

parties’ choice of law when there was a reasonable basis for

that choice of law.

Likewise, the Court of Appeals affirmed the eradication

of the parties’ choice of law. In a contract between citizens

of different states, the Court of Appeals would not permit the

parties to choose the law to govern the validity of the contract

and the rights created thereby. The Court concluded that the

policy of certainty, predictability and convenience engendered

in the parties’ power to choose the law of Ohio to govern

their contract “is inapplicable in this case, because, under

Nebraska law, the parties could not have resolved to apply

Ohio law even with an explicit provision.” Compounding this

fundamental error, the Court concluded that the objectives of

contract law to protect justified expectations and to foretell

with accuracy the rights and liabilities under the contract

could not have been realized because “Ohio has no substantial

relationship to the parties or the transaction.” Exacerbating

these errors, the Court concluded that certainty, predictability

and convenience were to be trumped because “application of

Ohio law would violate a fundamental policy of Nebraska

~ law.” These three conclusions, however, are contrary to the

fundamental right of the parties to contract to protect their

goodwill and investment, impose an unreasonable burden on

interstate commerce, defeat the-reasonable expectation of the

parties, violate due process, infringe the Full Faith and Credit

Clause and contradict the reasoning of other Circuit Courts of

Appeal.

Reasons for Granting the Petition

Conflict of law rules implicate fundamenta! constitutional

provisions including the Commerce Clause of Article I,

Section 8, which limits the power of a State to apply its local

law to interstate transactions, the Contract Clause of Article

I, Section 10, which limits the power of a state to impair

obligations of contracts, the Full Faith and Credit Clause of

Article IV, Section 1, which limits the extent to which a state

may ignore the law of the sister state and the Due Process

Clause of Section | of the Fourteenth Amendment, which

limits the extent to which a State may deprive the citizens of

a sister State of property without due process of law.

Restatement of Conflict of Laws 2d (“Restatement”), §2. As

one commentator observed, “Choices of law rules may not

prefer local citizens to citizens of a sister state, .... And they

may not prefer forum law to the law of sister states, that is the

principle of [the Full Faitttand Credit Clause].” D, Laycock,

Equal Citizens of Equal and Territorial States: The

Constitutional Foundations of Choice of Law, 92 Columbia L.

Rev. 249, 251 (1992). To accommodate such constitutional

protections and assure that multistate transactions are not

unreasonably burdened with parochial limitations, the choice

of the applicable rule of law must be animated with

considerations for the protection of the parties’ justified

expectations; certainty, predictability and uniformity of result;

and ease in the determination and application of the law to be

applied.

“Prime objectives of contract law are to protect the

justified expectations of the parties and to make it possible for

them to foretell with accuracy what will be their rights and

liabilities under the contract. These objectives may best be

attained in multistate transactions by letting the parties choose

the law to govern the validity of the contract and the rights

created thereby.” Restatement §187, Comment e (emphasis

added). “[T]he values of certainty, predictability and

uniformity of result are closely linked with the protection of

parties’ expectations that their contractual choice of law will

be honored because “unless these values are attained, the

expectations of the parties are likely to be disappointed.”

Barnes Group, Inc. v. C & C Producers, Inc., 716 F. 2d

1023, 1040 (4™ Cir. 1983) (Murnagham, J. concurring in part

and dissenting in part). Permitting the parties to realize their

justified expectations in their contractual obligations

transcends the parochial and effectuates the constitutional

protections embodied in the conflict of law rules. However,

the court of appeals eviscerated the fundamental right of the

parties to determine the nature of their obligations; attenuated

the certainty, predictability and uniformity of result;

denigrated the constitutional protections animating conflict of

law rules; and was in conflict with authoritative decisions of

every other United States Court of Appeals that has addressed

the issue.

“A choice-of-law decision that frustrates the justifiable

expectations of the parties can be fundamentally unfair. This

desire to prevent unfair surprise to a litigant has been the

central concern to this Court’s review of choice-of-law

decisions under the Due Process Clause.” Allstate Insurance

Co. v. Hague, 449 U.S. 302, 327 (1981) (Stevens, J.,

concurring). Likewise, the justifiable expectations of the

parties “may also implicate State interests cognizable under

the Full Faith and Credit Clause.” /d. at 324, n. 11 citing

John Hancock Mutual Life Ins. Co. v. Yates, 299 U.S. 178

(1936).

“Contracting parties can, of course, make their

expectation explicit by providing in their contract either that

the law of a particular jurisdiction shall govern questions of

contract interpretation or that a particular substantive rule ...

shall or shall not apply.” /d. at 328 (Stevens, J., concurring)

(footnotes omitted). Here, the expectation of the parties was

to have the Employment Agreements, and in particular the

post-employment obligations set forth in those contracts,

construed, interpreted and applied in accordance with Ohio

law. This choice of Ohio law is further confirmed by the

parties’ agreement that a court of law enforcing any covenant

should modify or reform the obligations as necessary “to

create an obligation to the full extend (sic) permitted by law.”

Under Ohio law, courts are empowered to modify or amend

employment agreements in order to achieve a reasonable

covenant restraining a former employee from competing with

a former employer. Raimond v. Van Vlerah, 42 Ohio St. 2d

21, 25, 325 N.E.2d 544, 547 (1975). (“Courts are

empowered to modify or amend employment agreements to

achieve such results.”). “(T]he fact that the contract ...

makes reference to legal doctrines that are peculiar to the

local law of a particular state ... provide[s] persuasive

evidence that the parties wish to have this law applied.”

Restatement, §187, Comment a. Given the explicit reference

‘to Ohio law and the parties’ preference for reformation, the

“law of the state chosen by the parties to govern the

contractual rights and duties will be applied ¢

Restatement, §187(1). Clearly, the parties had made their

expectations explicit.

In the context of interstate transactions, particularly

employers who are engaged in business in multiple states, the

choice of the same governing law permits uniformity of

application, consistency in administration and equality in

result. This Court must take into account the chaotic

employment conditions under which employees would have

to work if employers were unable to treat their workers

uniformly. Those in some states would be bound to comply

with their contractual undertakings, while others would be

free to enjoy substantial advantages, negotiating favorable

terms with competitors by which the knowledge and contacts

gained through working for an employer could be diverted to

them. “Bruised feelings aud jealousies would be inevitable.

Worse, the restrictive covenants might well, practically

speaking, in order to promote tranquility, have to be

eliminated in all contracts, even those entered into with:

managers working in states which permit such covenants.”

Barnes Group, 716 F. 2d at 1041, n. 9 (Murnagham, J.,

concurring in part and dissenting in part).

’ As a multistate employer with employees fron; Oregon to

New York, DCS has considerable interest in the application

of one state’s contract law to all of #* employment

agreements. As it currently engages in busine... .. 20 different

states, DCS could conceivably have 20 different forms for its

employees working in the same position with totally different

restrictions and obligations. The practical problems would

increase if employees were moved to jobs in different states

or if an employee left DCS and sought employment in

violation of a covenant not-to-compete in a different state

where he was employed. Having multiple non-compete and

non-piracy provisions throughout the United States would

impose a great administrative burden on DCS and similarly

situated multistate employers. Ultimately, these conflicting

rules and regulations would serve to undermine the efforts of

management at DCS and other similarly situated employers to

make reasonable business judgments on the scope and terms

that are necessary to protect the proprietary interest and

goodwill of their companies.

In addition to promoting consistency and uniformity in

employment, the choice of the same governing law enables

multistate employers to protect their investment in business

plans, policies and procedures, training and trade secrets.

Multistate employers create proprietary information, strategic

business plans, policies and procedures, training and

development which they export throughout the United States

where they do business. To assure uniformity and

consistency in the protection of that investment, employers

will include a choice of law in their employment agreements.

The selection of such law creates a reasonable expectation that

their investment, practices and property will be uniformly

protected. For example, DCS created proprietary information

in Ohio which it exported to Nebraska. Sanitation and safety

programs were designed in DCS’ corporate office in Ohio.

Formulation oi processes and procedures designed to improve

the efficiency of cleaning crews in Nebraska were made at

DCS’ corporate office in Ohio. Staffing and manning for

cleaning crews in Nebraska were planned at DCS’ corporate

office in Ohio. Investment of time and money to train and

develop employees into effective and efficient managers were

made at DCS’ corporate office in Ohio. DCS exported all of

these assets to Nebraska and intended to protect those assets,

in part, with the post-eimployment obligations contained in the

Employment Agreements to be governed under Ohio law.

A multistate employer, therefore, will have a reasonable

expectation that a choice of law clause intended to bring

stability in the hurly burly of interstate employment and

protection for its investment exported throughout the United

States will be enforced provided that the chosen law has some

substantial relationship to the parties. “When the state of the

chosen law has some substantial relationship to the parties of

the contract, the parties will be held to have had a reasonable

basis for their choice. This will be the case ... when the state

is ... where one of the parties is domiciled and has its

principal place of business.” Restatement, §187, Comment f.

When a multistate employer has such a reasonable basis for

its choice of law, that employer has justifiable expectations

which cannot be frustrated without violating the constitutional

provisions animating choice of law. Therefore, a court

cannot choose to vitiate that choice of law. Instead, a court

must adhere to and give effect to that choice of law.

Just as materially enlarging the contractual obligations of

one of the parties where there is no expectation of such

enlargement is violative of due process, see, e.g. Home Ins.

Co. v. Dick, 281 U.S. 397 (1930), equally pernicious is

materially contracting the obligations where there is no

expectation of such contraction. Under either scenario,

expectations are frustrated and obligations are altered. Each

equally deprives the party of the benefit of the bargain made

and deprives the party of constitutional rights.

Unlike other cases this Court has considered, this case

presents a multistate employer who had a reasonable basis for

its choice of law, made its expectations known by express

provision in the contract, included a particular substantive

rule «f contract law to reaffirm its expectations, sought to

enforce that choice of law against parties to the contract and

not third parties and yet was denied its reasonable

expectations. For example, in Clay v. Sun Insurance Office,

Ltd., 377 U.S. 179 (1964), the Court allowed the lower

court’s choice of forum law to override an express

contractual limitation. “The Court emphasized the fact that

the insurer had issued the insurance policy with the

knowledge that it would cover the insured property wherever

it was taken. /d., at 181-182. The Court also noted that the

insurer had not attempted to provide in the policy that the

law of another State would control. /d., at 182.” Allstate,

at 329 n. 20. Likewise, in Watson v. Employers Liability

Assurance Corp., 348 U.S. 66, 68 (1954), the Court found

that neither the Due Process Clause nor the Full Faith and

Credit Clause prevented the Louisiana courts from applying

forum law to permit a direct action against the insurer prior

to determination of the insured’s liability. “An additional,

although unarticulated, factor in Watson was the fact that the

litigant urging that forum law be applied was not a party to

the insurance contract. While contracting parties may be

able to provide in advance that a particular rule of law will

govern disputes between them, their expectations are clearly

entitled to less weight when the rights of third-party litigants

are at issue.” Allstate at 329, n. 20 (Stevens, J.,

concurring). Where a multistate employer does provide in

advance that a particular rule of law will govern the disputes

arising from an employment agreement, and there is a

reasonable basis for that choice and that choice is intended to

promote stability and uniformity among employees and

protect the employer’s investment and goodwill, a court must

give effect to that choice of law. To do otherwise would

violate the Due Process Clause of the Fourteenth Amendment

and impose unreasonable burdens on contracts made in

interstate commerce.

A uniform choice of law effecting consistency and

predictability in interstate transactions also implicates the Full

Faith and Credit Clause.

The very purpose of the full faith and credit clause

was to alter the status of the several states as

independent foreign sovereignties, each free to ignore

obligations...and to make them integral parts of a

single nation throughout which a remedy up: a just

obligation might be demanded as of right, irrespective

of the state of its origin.

Milwaukee County v White Co., 296 U.S. 268, 276-277

(1935). “The Full Faith and Credit Clause implements this

design by directing that a State, when acting as the forum for

litigation having multistate aspects or implications, respect the

legitimate interests of other States, and avoid infringement

upon their sovereignty.” Allstate, at 322 (Stevens, J.,

concurring). “Discrimination against citizens of sister states,

justified only by a preference for locals or a view that the

state has no interest in protecting outsiders, undermines our

tendency to think of ourselves as a single people and leaves

_ the victims with a legitimate sense of raw injustice.” D.

Laycock, Equal Citizens, 92 Columbia L. Rev. at 264; see

Thomas v. Washington Gas Light Co., 448 U.S. 261, 272

(1980) (The Full Faith and Credit Clause was intended to

prevent “parochial entrenchment on the interest of other

states.”). :

To permit parochial interests to trump reasonable

expectations creates substantial incentives for forum shopping

and leaves reasonable business people uncertain of what law

is applicable to their conduct until a lawsuit is filed. This

prediction has become an epidemic. M. Cheskin,

“Employment law when distance is no object”, Midwest

Construction Law @ midwestconstructionlaw.com (2006); D.

Benson, National Forum Shopping Restrictive Covenants,

Bloomberg Corporate L. Journal 91 (2006); D. Benson, et

al., “New Race to Tennessee and Georgia Courthouses Over

Non-Competition Agreements”, 41 Tenn. Bar J. 18 (2005).

Now the race to the courthouse and not the choice of law

decides the enforceability of post-employment obligations.

One example illustrates the length to which state laws are

trumping reasonable expectations.

In Keener v. Convergys Corp., 205 F. Supp.2d 1374

(S.D. Ga. 2002) aff'd in part and rev'd in part 342 F.3d 1264

(11th Cir. 2003), James Keener filed an action in the district

court seeking a declaration that the non-compete he signed

was unenforceable. Keener also sought an injunction to

restrain Convergys from even trying to enforce the non-

compete. Keener had been working for a predecessor of

Convergys in 1994 in Ohio. In 1995, Keener, who at the

time was not a Georgia citizen, signed a non-compete as a

condition of his continued employment, which contained an

Ohio choice-of-law provision. Keener remained employed

with Convergys in Ohio and then Illinois until he voluntarily

resigned in March 2001, when he accepted employment with

a competitor in Georgia. Despite a contract negotiated in

Ohio, performed in Ohio and a provision that Ohio law would

determine the obligations of the agreement, the district court

ruled that the choice-of-law provision would not be enforced.

_ Effectively ,- the district court permitted Keener to shop the

forum in order to obtain a result contrary to what had been

expected when the parties first negotiated the agreement. The

court even observed: “This may wind up encouraging non-

Georgia employees to ‘flee to Georgia’ to shed their [non-

compete agreements].” /d., 205 F. Supp.2d at 1379.

Likewise, one of the Former Employees was a resident of

Iowa. He could shop for a forum for declaration of his rights

under his Employment Agreement in Nebraska, Iowa or

Ohio. The result, however, would be left to the whims of

local law.

The cure recommended by one commentator was:

Eliminating forum preference altogether is the only

constitutional solution. The forum cannot apply its

own law in all cases, or in all cases of true conflicts.

The forum cannot apply its own law in all cases with

which it has reasonable contacts, or all cases in which

it has an interest, or all cases in which no one would

be unfairly surprised. If an employer hired black

applicants only when they were clearly superior to the

white applicants, and hired whites whenever the

comparison between applicants was fairly debatable,

we would easily conclude that the employer

discriminated. Similarly, when a forum prefers its

own law in fairly debatable choice-of-law cases, it is

discriminating against the law of sister states and

denying the equal status of sister-state law. Whatever

criteria are invoked to identify close or debatable

cases, forum law cannot be the tiebreaker. Under the

Full Faith and Credit Clause, the identity of the forum

is irrelevant to choice of law.

D. Laycock, Equal Citizens, 92 Columbia L. Rev. at 311.

DCS does not recommend such radical surgery to cure

this cancer. Instead, DCS urges that the Court mandate that

a choice of law in a contract in interstate commerce based on

a reasonable connection to the parties and intended to promote

reliability, certainty and equality in contract administration

cannot be trumped by the parochial interest of the forum law.

Rather, a court must give effect to the parties’ choice of law.

This Court has already precluded parochial interests from

trumping contract provisions which assure certainty and

predictability of result in interstate commerce. In Carnival

Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991), the Court

found a forum clause included in the “terms and conditions”

to a ticket for passage on a cruise ship to be “permissible for

several reasons:”

Because a cruise ship typically carries passengers from

many locales, it is not unlikely that a mishap on a

cruise could subject the cruise line to litigation in

several different fora. *** Additionally, a clause

establishing ex ante the forum for dispute resolution

has the salutary effect of dispelling any confusion

about where suits arising from the contract must be

brought and defended, sparing litigants the time and

expense of pretrial motions to determine the correct

forum and conserving judicial resources that otherwise

would be devoted to deciding those motions.

Id. at 593-594 (citations omitted). Likewise, a choice of law

clause in a standard contract designed to promote equality and

consistency among employees and to protect proprietary

information, investment, training and goodwill exported

throughout the United States has the salutary effect of

dispelling any confusion about what law will govern the

parties’ duties and obligations under the contract. Such a

clause would also spare the litigants and the court the time

and expense of litigating the conflict of law question.

Not only may the forum be chosen by contract, the statute

of limitations may also be contracted. In Order of United

Commercial Travelers v. Wolfe, 331 U.S. 586, 608 (1946),

the Court acknowledged:

...€ provision in a contract may validly limit, between

the parties, the time for bringing an action on such

contract to a period less than that prescribed in the

general statute of limitations, provided that the shorter

period itself shall be a reasonable period. Such

shorter periods, written into private contracts, also

have been held to be entitled to the constitutional

protection of the Fourteenth Amendment under

appropriate circumstances.

Given the current state of the law in the Eighth Circuit,

however, a multistate employer with a substantial relationship

to a state, for example, Ohio, could have elected to have all

disputes related to its employment agreements resolved in an

Ohio court and subject to shortened time limits but could not

have elected to have the obligations of those agreements

governed by Ohio law. Like a valid forum-selection clause,

enforcement of a choice of law clause, bargained for by the

parties, “protects their legitimate expectations and furthers

vital interests of the justice system.” Stewart Organization,

Inc. v. Ricoh Corp., 487 U.S. 22, 33 (1988) (Kennedy, J.,

concurring). “Courts should announce and encourage rules

that support private parties who negotiate such clauses.” /d.

at 33.

While the Court has decided that “the Full Faith and

Credit Clause does not require a State to apply another State’s

law in violation of its own legitimate public policy” Nevada

v. Hall, 440 U.S. 410, 422 (1979), the choice of Ohio law in

this case would not violate Nebraska public policy. The law

of Ohio and the law of Nebraska share the same criterion to

judge the validity of post-employment covenants not-to-

compete. See Lake Land F +>. Group of Akron v. Columber,

101 Ohio St. 3d 242, 248, 804 N.E.2d 27, 33 (2004) and

Mertz v. Pharmacists Mutual Ins. Co., 261 Neb. 704, 711,

625 N.W.2d 197, 204 (2001). In addition to the common

criterion, the law of Ohio and the law of Nebraska share the

Same objective of contract construction. See Aultman

Hospital Assn. v. Hospital Care Corp. , 46 Ohio St. 3d 51, 53

544 N.E.2d 920, 923 (1989) and T. V.. Transmission v. City of

Lincoln, 220 Neb. 887, 890, 374 N.W.2d 49, 52 (1990).

Likewise, judicial reformation is not a substantial public

policy of Nebraska which would vitiate the choice of Ohio

law.

While Nebraska courts have at times refrained “from

modifying the covenant in an effort to make it reasonable”,

see Ecolab, Inc. v. Morisett, 879 F.2d 325 (8th Cir. 1989)

citing Philip G. Johnson & Co. v. Salmen, 211 Neb. 123, 317

N.W.2d 900 (1982), contract reformation is not per se

violative of Nebraska public policy. See Par 3, Inc. v.

Livingston, 268 Neb. 636, 686 N.W.2d 369 (2004). The

Nebraska Supreme Court has been willing to enforce a

covenant not-to-compete within a reasonable geographic area.

Securities Acceptance Corp. v. Brown, 171 Neb. 406, 423,

106 N.W.2d 456, 467 (1960). (“A contract in restraint trade

in which the territory is unreasonably extensive may be

divisible as to space and enforced in equity within a

reasonable area.”). | Whether reformed or narrowly

reinforced, the result is the same, judicial enforcement of a

post-employment covenant.

In fact, the law of Nebraska makes clear that the remedy

of judicial reformation, which would lead to a different result,

is not a fundamental public policy. “In deciding choice of

law questions, Nebraska follows the Restatement (Second) of

Conflict of Laws.” Inacom Corp. v. Sears, Roebuck & Co.,

254 F.3d 683, 687 (8th Cir. 2001) citing Harper v. Silva, 224

Neb. 645, 399 N.W.2d 826 (1987). The Restatement makes

clear that the “result” cannot be a basis to refrain from

applying the chosen law. Restatement, §187, Comment g

(“The forum will not refrain from applying the chosen law

merely because this would lead to a different result than

would be obtained under the local law of the state of the

otherwise applicable law.”). Moreover, Nebraska’s

reluctance to adopt a uniform rule favoring reformation of

restrictive covenants does not itself constitute a fundamental

state policy contemplated by the Restatement.

Applying Ohio law, therefore, would not only be

consistent with the expressed intentions of the. parties,

applying Ohio law would be consistent with the public

policies of Nebraska as expressed in and through the

Restatement.

Prime objectives of contract law are to protect the

justified expectations of the parties and to make it

possible for them to foretell with accuracy what will

be their rights and liabilities under the contract. The

objectives may best be attained in multi-state

transactions by letting the parties choose the law to

govern the validity of the contract and the rights

created thereby. In this way, certainty and

predictability of result are most likely to be secured.

Giving parties this power of choice is also consistent

with the fact that, in contrast to other areas of the law,

persons are free within broad limits to determine the

nature of the contractual obligations.

Restatement, §187, Comment e. In fact, abrogating a

reasonable choice of law without any countervailing public

policy amounts to discrimination and denial of equal

protection under the Full Faith and Credit Clause and in effect

impairs otherwise valid contracts.

In addition to voiding the choice of law and depriving the

parties of their fundamental constitutional rights, including

materially impairing DCS’ ability to conduct business in

interstate commerce, and defeating its reasonable

expectations, the opinion of the Court of Appeals is in stark

conflict with every other Circuit Court of Appeal which has

concluded that the principal place of business of a corporation

alone was a substantial relationship to that state for the parties

to select the law to govern their interstate contractual

obligations and enforce the parties’ choice of law. Kruzits v.

Visco, 40 F.3d 52 (3rd Cir. 1994); Curtis 1000, Inc. v. Suess,

24 F.3d 941 (7th Cir. 1994); Ferrofluidics Corp. v. Advanced

Vacuum Components, Inc., 968 F.2d 1463 (ist Cir. 1992);

Woodling v. The Garret Corp., 813 F.2d 543 (2nd Cir.

1987).

In Kruzits, the Third Circuit gave effect to the parties’

choice of law reasoning:

In the commercial world, where an Illinois company,

such as Heller, finances purchases of commodities,

machinery, and equipment in many, if not all, of the

states in the nation, it is understandable and reasonable

that Heller include choice of law provisions in its

financial agreements to ensure that those agreements

are governed by the law of its principal place of

business rather than the laws of each and every state

where its borrowers do business.

40 F.3d at 56. In Suess, the Seventh Circuit concluded that

the state of the principal place of business alone has a

sufficient connection with the contract to enforce the parties’

choice of law because the state of the principal place of

—

business has as much interest in regulating the out of state

operations of “its” firm as the foreign state has in protecting

its citizens. 24 F.3d at 948-949. In Ferrofluidics, the First

Circuit observed that a party’s principal place of business was

“a contact sufficient to allow the parties to choose that state’s

law to govern their contract.” 968 F.2d at 1467-1468. In

deciding to give deference to the parties’ choice of law, the

Court cautioned against nullification:

When the parties take the trouble to make a

contractual choice of law, often it is because they do

not want to have applied, by operation of the general

rule, the law of some other jurisdiction with the “most

significant” relationship to the contract. If a court can

nullify a contractual choice of law merely on the

ground that another jurisdiction has a more significant

relationship to the transaction than the chosen

jurisdiction, the courts can nullify virtually any

contractual choice - and do so for the very reason the

parties chose to do otherwise.

Id. at 1467. Likewise, the Second Circuit held in Woodling

that the state of the principal place of business is a reasonable

relationship for the Court to honor the parties’ choice with

regard to matters of substance. 813 F.2d at 552.

If different states make different judgments, the goals of

uniformity and predictability cannot be fully met, the law’s

role as a source of enforceable norms is weakened and the

constitutional principles outlined above are undermined. D.

Laycock, Equal Citizens, 92 Columbia L. Rev. at 331.

“Thus, the constitutional scheme for allocating authority

among the states is not complete without an allocation of

authority to specify choice-of-law rules.” Jd. at 331. This

Court has already observed: “To vest the power of

determining the extraterritorial effect of a State’s own laws

and judgments in the State itself risks the very kind of

parochial entrenchment on the interests of other States that it

was the purpose of the Full Faith and Credit Clause and other

provisions of Art. IV of the Constitution to prevent.” Thomas

v. Washington Gas Light Co., 448 U.S. 261, 272 (1980).

Authority to specify choice-of-law rules should also not reside

exclusively in the states, because each state is equal to all the

others and no state’s view should control. “And states tend

to be biased in favor of their own citizens and their own law;

that is why we needed the Privileges and Immunities and Full

Faith and Credit Clauses in the first place.” D. Laycock,

Equal Citizens, 92 Columbia L. Rev. at 331. Consequently,

this Court must assume responsibility for articulating clearly

a fundamental choice of law rule intended to promote goals of

uniformity and predictability as well as fulfilling the law’s

role as a source of enforceable norms and adhering to

fundamental constitutional principles.

The Court is not usurping authority. Rather, the Court is

fulfilling its responsibility to implement the territorial division

of authority among the states; assuring that the reasonabte

expectations of multistate employers are not frustrated; and

that parochial interests do not trump a party’s choice of law.

Where a party has chosen a law or set of laws which have

reasonable connection to the parties and which promotes

consistency and equality and protects that party’s investments,

that choice of law should be enforced without regard for the

law of the forum. Only such a rule can assure fundamental

constitutional principles this Court has recognized in its

choice of law cases. Only such a rule protects the integrity of

contracts, precludes unreasonable burdens on interstate

commerce, respects the reasonable expectations of the parties,

assures those expectations are not subjected to parochial

vexations, and is consistent with the Due Process and Full

Faith and Credit Clauses.

CONCLUSION

The petition for a writ of certiorari should be granted.

Respectfully submitted,

James F. McCarthy, Ill

Counsel of Record

Bradley G. Haas

Jerome Bishop

Katz, Teller, Brant & Hild

255 E. 5" St., Ste. 2400

Cincinnati, Ohio 45202

(513) 721-4532

Counsel for Petitioner

APPENDIX A

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

No. 05-1201

[Filed April 4, 2006]

DCS Sanitation Management, Inc.,

Appellant,

Eloy Castillo, et al.,

)

Appellees. )

)

Order Denying Petition for Rehearing

and for Rehearing En Banc

The petition for rebearing en banc is denied. The petition

for rehearing by the p_ el is also denied.

APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

No. 05-1201

[Filed January 25, 2006]

DCS Sanitation Management, Inc.,

Appellant,

Vv.

Eloy Castillo; Efren George Castillo;

Adolfo Martinez,

Appellees.

ee ee ee ee ee ee a

Appeal from the United States District Court

for the District of Nebraska

Case No. 8:01CV222

Before RILEY, JOHN R- GIBSON, and COLLOTON,

Circuit Judges

OPINION

RILEY, Circuit Judge.

DCS Sanitation Management, Inc. (DCS) sued three of its

former employees, Eloy Castillo, Efren George Castillo, and

Adolfo Martinez (collectively, former employees), alleging

the former employees breached noncompete agreements. DCS

appeals the district court’s' denial of DCS’s motion for a

preliminary- injunction and grant of summary judgment in

favor of the former employees. We affirm.

I. BACKGROUND

DCS, a Delaware corporation with its principal place of

business in Ohio, cleans food processing plants in thirteen

states, including Nebraska. DCS’s corporate office in Ohio

(1) formulates processes and procedures to improve cleaning

crew efficiency, (2) designs sanitation and safety programs for

all cleaning crews, (3) makes staffing decisions for all

cleaning crews, and (4) makes human resource policies and

decisions for all DCS employees.

The former employees worked for DCS as on-site

managers at the Tyson Foods plant in Dakota City, Nebraska

(Tyson plant). The former employees (1) had access to DCS’s

Staffing, sanitation, and safety programs, including the

allocation and monitoring of proper chemical dilutions;

(2) were responsible for enforcing regulatory safety

requirements and satisfying third party audit requirements;

(3) were familiar with staffing requirements for cleaning the

' The Honorable Laurie Smith Camp, United States District

Judge for the District of Nebraska.

Tyson plant; and (4) had knowledge of the Tyson plant’s key

contacts and business requirements.

As a condition of employment with DCS, each of the

former employees signed identical employment agreements

(Agreements) with DCS. The Agreements contained the

following noncompete provision:

NONCOMPETITION AFTER TERMINATION: For

a period of one (1) year following the date of

termination of employment for any reason, I will not

directly or indirectly engage in, or in any manner be

concerned with or employed by any person, firm, or

corporation in competition with [DCS] or engaged in

providing contract cleaning services within a radius of

one-hundred (100) miles of any customer of [DCS] or

with any customer or client of [DCS] or any entity or

enterprise having business dealings with [DCS] which

is then providing its own cleaning services in-house or

which requests my assistance or knowledge of contract

cleaning services to provide its own cleaning services

in-house. In the event of violation of this covenant,

[DCS], in addition to any other rights and remedies

available at law or otherwise, is entitled to an

injunction to be issued by a court or competent

jurisdiction enjoining and restraining employee from

committing any violation of this provision and

employee hereby consents to the issuance of the

injunction.

The Agreements also contained a choice-of-law provision:

“APPLICABLE LAW: This Agreement shall be subject to

and interpreted in accordance with the laws of Ohio.”

In June 2003, after DCS cleaned the processing side of the

Tyson plant for eighteen years, the Tyson plant solicited bids

from competing cleaning companies. As a result of the

bidding process, on September 18, 2003, the Tyson plant

selected Packers Sanitation Services, Inc. (Packers) for the

cleaning contract. Packers hired all of DCS’s employees,

‘including the former employees, and on November 8, 2003,

Packers started cleaning the Tyson plant.

On May 14, 2004, DCS sued the former employees,

alleging (1) breach of the noncompete agreements, (2) a

“substantial probability” the former employees would disclose

DCS’s trade secrets and confidential information, and

(3) breach of contract. DCS sought (1) to enjoin the former

employees in accordance with the noncompete agreements,

(2) to enjoin the former employees from disclosing DCS’s

trade secrets and confidential information, and (3) money

damages.

DCS moved for a preliminary injunction, and the former

employees moved for summary judgment. The district court

denied DCS’s motion for a preliminary injunction and granted

summary judgment in favor of the former employees,

concluding Nebraska has a materially greater interest in the

noncompete agreements at issue, and application of Ohio law

would violate a fundamental policy of Nebraska law. The

district court thus applied Nebraska law to determine the

validity of the noncompete agreements and concluded the

noncompete agreements were. overbroad and, therefore,

unenforceable.

DCS appeals the district court’s ruling, urging this court

to reverse the district court’s entry of summary judgment and

denial of a preliminary injunction, and to remand with

instructions to enjoin the former employees under Ohio law.

DCS argues reversal and remand is warranted here, because

(1) the district court erred in applying Nebraska law instead

of Ohio law, (2) the noncompete agreements are enforceable

under Ohio law, and (3) the district court abused its discretion

in denying injunctive relief for the period of the covenant

from the date of the court’s order. In response, the former

employees contend (1) the appeal is moot, (2) the district

court correctly applied Nebraska law, (3) the noncompete

agreements are overly broad and unenforceable, and (4) the

noncompete agreements are contracts of adhesion.

II. DISCUSSION

A. Mootness

The former employees contend this appeal is moot,

because the one-year time frame of the noncompete

agreements has expired. See Agrigenetics, Inc. v. Rose, 62

F.3d 268, 270-71 (8th Cir. 1995) (holding, under Nebraska

law, when a noncompete agreement’s time period runs out, an

appeal from the denial of a preliminary injunction is moot).

Although an appeal from a denial of injunctive relief may

become moot by the passage of time, a claim for damages

remains viable. See Curtis Indus., Inc. v. Livingston, 30 F.3d

96, 97 (8th Cir. 1994). Because DCS sought money damages

in addition to injunctive relief, this appeal is not moot.

B. Choice-of-Law Determination

DCS argues the district court erred when it evaluated

DCS’s claim under Nebraska law rather than Ohio law,

because the Agreements specify Ohio law governs. A district

court sitting in diversity jurisdiction applies the conflict of law

rules for the state in which it sits. Inacom Corp. v. Sears,

Roebuck & Co., 254 F.3d 683, 687 (8th Cir. 2001) (citing

Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61

S. Ct. 1020, 85 L. Ed. 1477 (1941)). Thus, we apply

Nebraska’s conflict of law rules and review de novo the

district court’s choice-of-law determination. Jd.

In deciding choice-of-law questions, Nebraska follows the

Restatement (Second) of Conflict of Laws (Restatement). /d.

Nebraska courts generally give effect to the parties’ choice of

law. Vanice v. Oehm, 247 Neb. 298, 526 N.W.2d 648, 651

(Neb. 1995); Restatement § 187(1). Restatement section

187(1) provides “the law of the state chosen by the parties to

govern their contractual rights and duties will be applied if the

particular issue is one which the parties could have resolved

by an explicit provision in their agreement directed to that

issue.” Restatement § 187(1). Section 187(2) provides the

‘parties’ contractual choice of law will apply unless (1) “the

chosen state has no substantial relationship to the parties or

the transaction and there is no other reasonable basis for the

parties’ choice,” or (2) “application of the law of the chosen

State would be contrary to a fundamental policy of a state

which has a materially greater interest than the chosen state

in the determination of the particular issue and which . . .

would be the state of the applicable law in the absence of an

effective choice of law by the parties.” Restatement

§ 187(2)(a), (b).

The district court applied Restatement section 187(2)

without analyzing whether section 187(1) or section 187(2)

applies in this case. Section 187(2) applies only when section

187(1) does not govern. See Restatement § 187, comment d.

Section 187(1) is inapplicable in this case, because, under

Nebraska law, the parties could not have resolved to apply

Ohio law even with an explicit provision. See CAE Vanguard,

Inc. v. Newman, 246 Neb. 334, 518 N.W.2d 652, 656 (Neb.

1994) (holding “the provision of the agreement which states

that a court may reform the covenant is of no effect. Private

parties may not confer upon the court powers which it does

not possess.”); see also Baxter Intern., Inc. v. Morris, 976

F.2d 1189, 1196 (8th Cir. 1992).

The first condition under section 187(2), whether “the

chosen state has no substantial relationship to the parties or

the transaction and there is no other reasonable basis for the

parties’ choice,” is met in this case. Restatement § 187(2)(a).

Nebraska has a substantial relationship to the parties and the

transaction, because the former employees and DCS entered

into the Agreements in Nebraska, the services at issue were

to be performed in Nebraska, the former employees reside in

Nebraska, the prohibition of the noncompete clause directly

and materially affects employment in Nebraska, and DCS

does business in Nebraska. Nebraska clearly possesses a

direct and substantial interest in the employment of its

citizens. The only relationship between Ohio and the parties

's the location of DCS’s corporate headquarters and principal

place of business in Ohio. The Agreements were not

negotiated, entered into, or performed in Ohio. Under these

circumstances, the district court properly concluded Ohio has

no substantial relationship to the parties or the transaction,

and Nebraska has a greater material interest in the

Agreements. See Powell v. Am. Charter Fed. Sav. & Loan

Ass'n, 245 Neb. 551, 514 N.W.2d 326, 332 (Neb. 1994)

(deciding the state with the most significant relationship to the

transaction and the parties is the state where the parties

contracted, negotiated, and resided; where the subject matter

was located; and where performance was to take place).

The second condition also is satisfied. Under section

187(2)(b), application of the chosen law is precluded if

“application of the law of the chosen state would be contrary

to a fundamental policy of a state which has a materially

greater interest than the chosen state” when the factors

articulated in section 188’ are applied. Restatement

§ 187(2)(b). Nebraska and Ohio courts have materially

different approaches to the reformation of unreasonable

noncompete agreements. In Nebraska, if a court determines

a noncompete agreement is unreasonable, the court will not

reform the noncompete agreement in erder to make it

enforceable. H & R Block Tax Servs., Inc., v. Circle A

Enters., Inc., 269 Neb. 411, 693 N.W.2d 548, 552 (Neb.

2005). Contrary to the Nebraska courts’ approach, Ohio

courts are empowered to reform overly broad or unreasonable

noncompete agreements to make them reasonable. Raimonde

v. Van Vlerah, 42 Ohio St. 2d 21, 325 N.E.2d 544, 547

(Ohio 1975). The district court correctly recognized that

because Nebraska courts expressly have rejected judicial

reformation of noncompete agreements, application of Ohio

law would violate a fundamental policy of Nebraska law.

? Section 188 provides in pertinent part:

(2) In the absence of an effective choice of law by the

parties (see § 187), the contacts to be taken into account in

applying the principles of § 6 to determine the law

applicable to an issue include:

(a) the place of contracting,

(b) the place of negotiation of the contract,

(d) the location of the subject matter of the contract,

and

(e) the domicil, residence, nationality, place of

incorporation and place of business of the parties.

These contacts are to be evaluated according to their relative

importance with respect to the particular issue.

10a

Because Nebraska has a greater material interest in the

Agreements and application of Ohio law would violate a

fundamental policy of Nebraska law, we hold the district

court correctly applied Nebraska law to the question of the

validity and enforceability of the noncompete agreements. See

First Nat'l Bank v. Daggett, 242 Neb. 734, 497 N.W.2d 358,

363 (Neb. 1993) (disregarding choice-of-law provision

because the chosen state had no contacts with the transaction

and the parties, and application of the chosen state’s law

would offend a strong public policy in the forum state). See

also Rain & Hail Ins. Serv., Inc. v. Casper, 902 F.2d 699,

700-01 (8th Cir. 1990) (applying Nebraska law to an

employment agreement’s noncompete clause choosing the

application of lowa law, which allowed modification of overly

restrictive noncompete provisions, and affirming conclusion

“lowa law would be contrary to a fundamental policy of

Nebraska”).

C. Validity of the Noncompete Agreements

Having concluded Nebraska law applies, we now turn to

whether the noncompete agreements are valid under Nebraska

law. Pursuant to Nebraska law, a noncompete agreement is

valid if it is (1) “not injurious to the public,” (2) “not greater

than is reasonably necessary to protect the employer in some

legitimate interest,” and (3) “not unduly harsh and oppressive

on the employee.” Prof’l Bus. Servs. Co. v. Rosno, 268 Neb.

99, 680 N.W.2d 176, 184 (Neb. 2004) (quotation omitted).

“An employer has a legitimate business interest in protection

against a former employee’s competition by improper and

unfair means, but is not entitled to protection against ordinary

competition from a former employee.” /d. at 185. A

noncompete agreement “may be valid only if it restricts the

former employee from working for or soliciting the former

employer’s clients or accounts with whom the former

lla

employee actually did business and has personal contact.”

Polly v.. Ray D. Hilderman & Co., 225 Neb. 662, 407

N.W.2d 751, 756 (Neb. 1987).

We conclude the district court properly held the

noncompete agreements were overbroad and unenforceable.

The district court recognized the noncompete agreements

prohibit the former employees from, directly or indirectly,

being concerned in any manner with any company in

competition with DCS, and from providing contract cleaning

services within one hundred miles of any entity or enterprise

“having business dealings” with DCS, including attorneys,

accountants, delivery services and the like. The breadth of the

noncompete agreements effectively put the former employees

out of the cleaning business within an extensive region. We

hold the district court did not err in concluding Nebraska

courts would not enforce such overly broad noncompete

agreements. See Rosno, 680 N.W.2d at 186-87 (holding

noncompete agreement was overly broad where the agreement

prohibited the former employee from soliciting or contacting

any of the former employer’s clients and where the former

employer could not establish the former employee had done

business with or had substantial personal contact with all of

the former employer’s clients); Mertz v. Pharmacists Mut.

Ins. Co., 261 Neb. 704, 625 N.W.2d 197, 205 (Neb. 2001)

(holding noncompete agreement was overly broad where it

was not limited to clients with whom the former employee

actually did business or personally contacted); Moore v.

Eggers Consulting Co., Inc., 252 Neb. 396, 562 N.W.2d

534, 540 (Neb. 1997) (holding noncompete agreement was

overly broad where it prohibited soliciting or accepting

business opportunities with any client of the former employer

with whom the former employee worked or had knowledge

of, and where the agreement contained an overly broad

geographical restriction); Whitten v. Malcolm, 249 Neb. 48,

12a

541 N.W.2d 45, 48 (Neb. 1995) (holding noncompete

agreement was overly broad where it prohibited practicing

dentistry within geographic location and was not limited to

clients with whom the former employee did business and had

personal contact and was not even limited to the former

employer’s existing customer base); Viasin v. Len Johnson &

Co., Inc., 235 Neb. 450, 455 N.W.2d 772, 776 (Neb. 1990)

(holding noncompete agreement was overly broad where it

prohibited the former employee from entering into insurance

business within fifty miles and was not limited to the former

employer’s clients with whom the former employee did

business and had personal contact); Polly, 407 N.W.2d at 756

(holding noncompete agreement was overly broad where it

prohibited soliciting or working for the former employer’s

clients with whom the former employee did not work and did

not even krow).

lil. CONCLUSION

Therefore, we affirm the well reasoned judgment of the

district court.

13a

APPENDIX C

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEBRASKA

CASE NO. 8:04CV222

{Filed December 14, 2004]

DCS SANITATION MANAGEMENT, INC.,

Plaintiff,

ELOY CASTILLO, EFREN GEORGE

CASTILLO, and ADOLFO MARTINEZ,

Defendants.

)

ORDER DENYING PLAINTIFF’S MOTION FOR

PRELIMINARY INJUNCTION AND GRANTING

DEFENDANTS’ MOTION FOR SUMMARY

JUDGMENT

This matter is before the Court on two motions. Shortly

after this case was filed, the Plaintiff filed a motion for a

preliminary injunction. (Filing No. 9). The Defendants

oppose the motion. More recently, the Defendants filed a

motion for summary judgment that the Plaintiff opposes.

(Filing No. 30). The parties have fully briefed the issues, and

they have submitted evidence in support of their positions.

14a

For the reasons that follow, the motior ‘or preliminary

injunction is denied, and the motion for summary judgment is

granted.

The Defendants Eloy Castillo, Efren George Castillo, and

Adolfo Martinez are former employees of the Plaintiff, DCS

Sanitation Management Services, Inc. (hereafter “DCS”).

The Defendants had been employed by DCS as onssite

managers assigned to cleaning the processing side of the

Tyson Meat Packing plant in Dakota City, Nebraska. In

1995, the Defendants executed agreements with DCS that

contained both noncompetition and confidentiality provisions

and that provided for both injunctive relief and liquidated

damages in the event of a breach. The Defendants left DCS

in November 2003, to begin employment with another

cleaning company. DCS’s Complaint alleges that the

Defendants breached the agreements and that DCS is entitled

to relief.

The Defendants have moved for summary judgment based

on four arguments, 1) that the Defendants, all of whom are

Hispanic, did not possess sufficient understanding of the

English language to be able to read and understand the

employment agreements; 2) that the covenants contained in

the agreements are overbroad; 3) that the matter is moot

because DCS did not bid the cleaning contract at issue; and

4) that the case is barred by the doctrine of collateral

estoppel. Of these four, I find that only one warrants

significant analysis here: whether the covenants are overbroad

and unreasonable and, therefore, void as a matter of law.'

' With regard to the other three arguments, I note briefly the

following. A genuine issue exists regarding the extent to which the

Defendants understood the agreements that they executed, and, for

that reason, summary judgment is not appropriate on that basis

15a

Undisputed F acts

In June 2003, Tyson solicited bids from other cleaning

and sanitation companies for the Dakota City plant. At that

time, DCS had the contract for the meat processing side of the

plant, and Packers Sanitation Service, Inc. (“PSSI”)’ had the

contract for the slaughter side of the plant. (Filing No. 37,

Declaration of Thomas Murray { 15; Filing No. 17, Prellwitz

Aff. ¢ 2). This was not the first time during DCS’s contract

with Tyson that Tyson had solicited bids from other cleaning

contractors. On previous occasions, the practice between

Tyson Foods and DCS was that DCS would not submit a

formal bid, but instead, Tyson would consider DCS’s current

contract to constitute its bid. (Murray Dec. { 17). The

Plaintiff has offered hearsay evidence that Chris Rupp, Tyson

Foods’ Dakota City Plant Manager, stated that the company

that wanted the cleaning contract would need to employ Eloy

Castillo and his management team, consisting of the other

Defendants. (Filing No. 37, Murray Dec. 4 16; Shane Nelson

Dec. 4 19). As a result of the bidding process, Tyson awarded

(Compare Filing No. 32, Ex. 1, 16-18; 89-90; Ex. 2, 8-9, 46,47;

Ex. 3, 13-14, 23-24 with Filing No. 37, Ex. 3, Declaration of B.

Jaqua at 44 7,8; and Ex. 4 Declaration of D. Edwardson at 4§ 4-7).

The Defendants’ argument that the matter is moot because DCS did

not bid the Tyson contract in 2003, is thwarted given the evidence

that Tyson considered DCS’s current contract as its “bid,”

consistent with their previous practice. (Filing No. 37, Ex. 1

Declaration of Thomas Murray { 17). Finally, the doctrine of

collateral estoppel does not apply to bar any claim in this case

because the doctrine requires that a final judgment on the merits be

entered on the particular issue and that has not occurred in any

previous case.

> PSSI is also known as National Service Company of Iowa.

16a

the new contract for cleaning the processing side of the plant

to PSSI. (Prellwitz Aff. 4 15). On the first day of the new

contract, the Defendants went to work for PSSI at Tyson’s

Dakota City plant.

The Agreements

The agreements between DCS and each of the Defendants

are the same except for the employee signature line. In

relevant part, the agreements state as follows:

2. Solicitation of Customers: During the term of my

employment by the Company and for a period of

one (1) year following the date of termination of

employment for any reason, I will not request or

advise any customer or client of the Company, or

any entity or enterprise having business dealings

with the Company, to cancel or curtail any

business dealings with the Company. The violation

of this covenant will irreparably harm Company’s

business. Accordingly, I will pay to company as

liquidated damages 25 percent of the gross

revenue received or receivable during the term of

this covenant from any customer or former

customer of Company as a result of the violation.

* * * *

4. Noncompetition after termination: For a period of

one (1) year following the date of termination of

employment for any reason, I will not directly or

indirectly engage in, or in any manner be

concerned with cr employed by any person, firm

Or corporation in competition with Company or

engaged in providing contract cleaning services

17a

within a radius of one-hundred (100) miles of any

customer of Company or with any customer or

client of Company or any entity or enterprise

having business dealings with Company which is

then providing its own cleaning services in-house

or which request my assistance or knowledge of

contract cleaning services to provide its own

cleaning services in-house. In the event of

violation of this covenant, Company, in addition to

any other rights and remedies available at law or

otherwise, is entitied to an injunction to be issued

~ by acourt of compevent jurisdiction enjoining and

restraining employee from committing any

violation of this provision and employee hereby

consents to the issuance of the injunction.

Confidential Information: Except as specifically

authorized by Company, I will not either before or

after the termination of my employment with

Company, directly or indirectly use, disseminate,

disclose, or discuss any information disclosed to

or known “by me as a result of or through my

relationship with Company about Company’s

processes, services, policies, procedures, prices or

customers including without limitation customer

lists, employee information, price schedules,

know-how concerning the Company’s contract

cleaning processes, and other trade secrets

employed by Company in the course of its

business. Upon termination of my employment, I

will deliver to Company all records, notebooks,

and other documents containing any information

described in the proceeding [sic] sentence, and all

copies of such documents in my possession or

under my control, whether prepared by me, the

18a

Company, or any third party. In the even of

violation of this covenant, Company, in addition to

any other rights and remedies available at law or

otherwise, is entitled to an injunction to be issued

by a court of competent jurisdiction enjoining and

restraining employee from committing any

violation of this provision and employee hereby

consents to the issuance of the injunction.

(Filing No. 32, Ex. 4; and Murray Dec. ¢ 26, Exs. A, B, and

C).

Summary Judgment

Summary judgment is proper if the evidence, viewed in

the light most favorable to the nonmoving party, demonstrates

no genuine issue of matevial fact exists and the moving party

is entitled to judgment as a matter of law. Fed. R. Civ. P.

56(c); Philip v. Ford Motor Co., 328 F.3d 1020, 1023 (8th

Cir. 2003). The proponent of a motion for summary judgment

“bears the initial responsibility of informing the district court

of the basis for its motion, and identifying those portions of

‘the pleadings, depositions, answers to interrogatories, and

admissions on file, together with the Declarations, if any,’

which it believes demonstrate the absence of a genuine issue

of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323

(1986) (quoting Fed. R. Civ. P. 56(c)). The proponent need

not, however, negate the opponent’s claims or defenses. /d.

at 324-25.

In response to the proponent’s showing, the opponent's

burden is to “come forward with ‘specific facts showing that

there is a genuine issue for trial.’” Matsushita Elec. Indus.

Co., v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)

(quoting Fed. R. Civ. P. 56(e)). A “genuine” issue of

19a

material fact is more than “some metaphysical doubt as to the

material facts.” /d. at 586.

“[T}here is no issue for trial unless there is sufficient

evidence favoring the nonmoving party for a jury to return a

verdict for that party.” Anderson v. Liberty Lobby, Inc., 477

U.S. 242, 249 (1986). “If the evidence is merely

colorable . . . or is not significantly probative . . . summary

judgment may be granted.” /d. at 249-50 (citations omitted).

Summary judgment is “properly regarded not as a

- disfavored procedural shortcut, but rather as an integral part

of the Federal Rules as a whole, which are designed ‘to

secure the just, speedy and inexpensive determination of

every action.’” Celotex Corp., 477 U.S. at 327.

Choice of Law Provision

The parties disagree as to what state’s law applies to this

case. DCS argues that Ohio law applies pursuant to an

effective choice of law provision in the agreements, which

states, “This Agreement shall be subject to and interpreted in

accordance with the laws of Ohio.” (Filing No. 32, Ex. 4 at

q 8). The Defendants contend that Nebraska law applies,

because Nebraska has a materially greater interest in the

outcome of the case than does Ohio. Because the Court has

subject matter jurisdiction pursuant to 28 U.S.C. § 1332, the

Court applies the conflicts-of-laws rules of the forum state, in

this case Nebraska, to determine the substantive law that

applies to the case. Erie R. Co. v. Tompkins, 304 U.S. 64, 78

(1938); Klaxon Co. v. Stentor Elec. Mfg. Co., 312 U.S. 487,

496-97 (1941). See also Mertz v. Pharmacists Mut. Ins. Co.,

625 N .W.2d 197 (Neb. 2001).

20a

Nebraska’s approach follows the Restatement (Second) of

Conflict of Laws. Inacom Corp. v. Sears, Roebuck and Co.,

254 F.3d 683, 687 (8" Cir. 2001 ), citing Harper v. Silva,

399 N.W.2d 826, 828 (Neb. 1987). While Nebraska courts

generally give effect to parties’ contractual choice of law,

they recognize an exception to the rule where application of

another state’s law would violate pubic policy in Nebraska.

Vanice v. Oehm, 526 N.W.2d 648, 651 (Neb. 1995). See also

First Nat. Bank in Mitchell v. Daggett, 497 N.W.2d 358, 363

(Neb. 1993), citing Lauritzen v. Larsen, 345 U.S. 571, 588-

89 (1953) (stating that “[u]nless contrary to public policy,

choice-of-law provisions are usually enforced” by Nebraska

courts). In following the Restatement (Second) of Conflict of

Laws § 187, the Nebraska courts have concluded that “[t}he

law of the state chosen by the parties to govern their

contractual rights and duties will be applied, unless:

1) another state has a materially greater interest in the issue;

and 2) the chosen law would violate a fundamental policy of

the state with the greater interest.” Restatement (Second) of

Conflict of Laws § 187(1). See also JRT, Inc. v. TCBY

Systems, Inc.. 52 F.3d 734, 739 (8th Cir. 1995); Ermer v.

Case Corp., 2002 WL 1796438 (D.Neb. Aug 05, 2002).

Nebraska courts have not been reluctant to declare a choice of

law provision contrary to public policy.’

> For instance, in Daggett, the Nebraska Supreme Court

concluded that Nebraska law should be applied, even though the

trust document at issue stated that Georgia law would apply to

determine the identity of the trust’s beneficiaries. In reaching this

conclusion, the Nebraska court found these facis material: 1) the

trust was created and executed in Nebraska; 2) the real estate that

was held in trust was located in Nebraska; and 3) Georgia had

absolutely no contacts with the trust, the parties, or the real estate.

Daggett, 497 N.W.2d at 363. On another occasion, the Nebraska

court refused to give effect to the parties’ choice of law provision

2la

In determining whether Nebraska has a materially greater

interest in the agreement, the Restatement (Second) of

Conflict of Laws § 188(1 ) incorporates the factors identified

in § 6:

(a) the place of contracting,

(b) the place of negotiation of the contract,

(d) the location of the subject matter of the contract,

and

(e) the domicile, residence, nationality, place of

incorporation and place of business of the parties.

See Mertz v. Pharmacisis Mut. Ins. Co., 625 N.W.2d 197,

202 (Neb. 2001). Using these criteria to evaluate each state’s

material interest in these agreements, I find that Nebraska has

a greater material interest in the agreements at issue in this

case than does Ohio. The parties contracted in Nebraska, the

only discussions about the agreements occurred in Nebraska,

the employment was in Nebraska, the services at issue have

been performed in Nebraska, all of the Defendants’ domiciles

and residences are in Nebraska, the restrictions that were

sought by DCS were to be imposed in Nebraska, and DCS is

doing business in Nebraska. I have weighed these factors

against the factor that DCS is incorporated in and has its

corporate headquarters and principal place of business in

Ohio. The balance compels the conclusion that Nebraska has

a greater material interest in the agreements at issue than

Ohio. '

when, to do so, would have required the Court to apply the law of

another state to a mortgage foreclosure action affecting real estate

located in Nebraska. Vanice, 526 N.W.2d at 651-52.

22a

I next consider whether application of Ohio law would

violate a fundamental policy of Nebraska. I conclude that it

would. Nebraska courts have long held that “[c]ontracts in

restraint of trade must conform to the public policy of the

State of Nebraska when executed or expected to be performed

in this state ....”. Diamond Match Corp. v. Bernstein, 243

N.W.2d 764, 766 (Neb. 1976). There is no dispute that the

agreements at issue were executed and were expected to be

performed in Nebraska. In Mertz, the Nebraska Supreme

Court affirmed that it will “refuse to enforce post-employment

covenants not to compete which are broader than reasonably

necessary to protect legitimate business interests on the

ground that such covenants are against public policy and

void.” 625 N.W.2d at 203-04 citing Presto-X-Company v.

Belier, 568 N.W.2d 235 (Neb. 1997). The Mertz court found

that Nebraska’s public policy -- that restrictions on post-

employment covenants must not be broader than required to

protect the former employer’s legitimate business interests --

outweighed another state’s interest in protecting the

contracting parties’ expectations as reflected in the

agreement’s choice-of-law provision. /d. (holding that

“lowa’s interest in protecting the expectations of the parties

is outweighed by Nebraska’s strong public policy

considerations on this tssue.”) See also Rain and Hail Ins.

Service, Inc. v. Casper, 902 F.2d 699, 700-01 (8th Cir. 1990)

(affirming district court’s refusal to enforce choice-of-law

provision designating lowa law as governing covenant not to

compete because application of lowa law would be contrary

to fundamental policy under Nebraska law).

Under either Ohio or Nebraska law, I suspect the

agreements between DCS and the Defendants would be found

to be-overbroad. Nevertheless, I do not view this as a “false

23a

conflict,"* because, having found the agreeme;'ts’

noncompetition provision to be overbroad, the application of

Ohio law would permit judicial reformation of the agreements

to make them reasonable.’ Because such judicial intervention

has been expressly rejected in Nebraska,° I conclude that the

* When the relevant legal principles are the same in both states,

“what has come to be called a false conflict” is presented and the

court need not resolve the choice of law issue. See Leonards v.

Southern Farm Bureau Cas. Ins. Co., 279 F.3d 611, 612 (8th Cir.

2002).

> In the Ohio landmark case, Raimonde v. Van Vlerah, 325

N.E.2d 544(Ohio 1975), the Ohio Supreme Court stated:

We hold that a covenant not to compete which imposes

unreasonable restrictions upon an employee will be

enforced to the extent necessary to protect the employer’s

legitimate interests. A covenant restraining an employee

from competing with his former employer upon termination

of employment is reasonable if it is no greater than is

required for the protection cf the employer, does not

impose undue hardship on the employee, and is not

injurious to the public. Courts are empowered to modify or

amend employment agreements to achieve such results.

Id. at 547 overruling Extine v. Williamson Midwest, Inc., 200

N.E.2d 297 (Ohio 1964). The Ohio rule allows the courts to

enforce non-competition covenants “only to the extent that the

restraints imposed thereby are reasonably necessary to protect the

employer’s legitimate business interests.” Brentlinger Enterprises

v. Curran, 752 N.E.2d 994 (Ohio App. 2001).

° The Nebraska Supreme Courts have expressly rejected that

approach. Viasin v. Len Johnson & Co., 455 N.W.2d 772, 776-77

(Neb. 1990). See also Terry D. Whitten, D.D.S., P.C. v. Malcolm,

541 N.W.2d 45, 48 (Neb. 1995)(holding “it is not the function of

24a

parties’ choice of law, Ohio, would violate the fundamental

public policy of Nebraska, and I conclude that Nebraska law

should be applied to determine the validity of the covenants.

Nebraska law

“{T]here are three general requirements for a valid,

partial restraint of trade such as a postemployment

covenant not to compete, namely: “First, is the

restriction reasonable in the sense that it is not

injurious to the public; second, is the restriction

reasonable in the sense that it is no greater than is

reasonably necessary to protect the employer in some

legitimate interest; and, third, is the restriction

reasonable in the sense that it is not unduly harsh and

oppressive on the employee.” American Sec. Servs. v.

Vodra, 222 Neb. 480, 486, 385 N.W.2d 73, 78

(1986).

Polly v. Ray D. Hilderman & Co., 407 N.W.2d 751,754

(Neb. 1987). Because I conclude that the agreements are

overbroad and, therefore, not reasonable under the second

and third general requirements, the agreements cannot be

enforced against the Defendants.

The agreements are overbroad because the restrictions are

much greater than are reasonably necessary to protect the

legitimate business interests of DCS, and are unduly harsh

and oppressive on the Defendants. The non-competition

provision, which is replete with language in the alternative,

can be read to restrict the Defendants 1) from being “in any

courts to reform unreasonable covenants for the purpose of making

them enforceable.”)

25a

manner be concerned with . . . any person, firm or

corporation in competition with the company”; and 2) from

“providing contract cleaning services within one hundred

(100) miles of any customer or client of the company or any

entity or enterprise having business dealings with company.”

The language restricts the Defendant from an expansive range

of activities, not just contract cleaning services, and it is not

limited to customers of DCS with whom the Defendants have

had contact. The 100-mile geographical restriction would

have stretched the bounds of reasonableness even if it were

tied to the Tyson plant in Dakota City, but it is not. The 100-

mile geographical restriction seeks to prevent the Defendants

from being employed in the contract cleaning service within

100 miles of any of DCS’s customers, which the record

reveals are located in at least thirteen different states. Murray

Dec. 44 12 and 13. In addition, the 100-mile restriction

applies to any entity or enterprise “having business dealings”

with the company - which is much broader than simply

DCS’s customers, and would include attorneys, accountants,

delivery services and the like.

I also conclude that the agreements are unduly harsh and

oppressive to the Defendants. Despite the Plaintiff's attempt

to make the services performed by these unskilled workers

sound technical and scientific, the skill at issue is cleaning.

(Filing No. 37, Declaration of Shane Nelson { 6). It is not the

type of skill that DCS can credibly take credit for developing

and honing based on a significant investment of time and

capital. (Filing No. 17, Prellwitz Aff. 7). These Defendants

were not well-heeled sales representatives whose job it was to

develop and nurture the relationship between DCS and Tyson.

They were officers and high level executives who were

entrusted with trade secrets and confidential customer

information. Their job was and is to clean. I have no doubt

26a

that the Defendants were good employees for DCS, but I am

mindful of the Nebraska court’s admonition that:

[A]n employer has a legitimate business interest in

protection against a former employee’s competition by

improper and unfair means, but is not entitled to

protection against ordinary competition from a former

employee.

Boisen v. Petersen Flying Serv., 383 N.W .2d 29, 33 (Neb.

1986); See also American Sec. Services, Inc. v. Vodra, 385

N.W.2d 73, 78 (Neb. 1986).

For all these reasons, { conclude that the noncompetition

provision does not satisfy the second or third requirements for

a valid partial restraint-of-trade agreement under Nebraska

law. As a matter of law, the Defendants are entitled to

summary judgment.

The Eighth Circuit Court of Appeals has affirmed this -

court’s decision to apply Nebraska law in similar situations.

In affirming the district court’s conclusion that the parties’

choice of law would violate Nebraska’s public policy, the

Eighth Circuit Court observed:

Although Nebraska law generally allows parties to

choose which jurisdiction’s law will apply in a

contract dispute (here lowa law), the [district] court

nevertheless applied Nebraska law, reasoning that

application of Iowa law would be contrary to a

fundamental policy of Nebraska. Under Nebraska law,

contracts in restraint of trade must be no greater than

reasonably necessary to protect the employer in some

legitimate interest. Polly v. Ray D. Hilderman & Co.,

225 Neb. 662, 407 N.W.2d 751,754 (1987). The

27a

district court found the restrictions of the non-compete

clause overbroad because the identity of customers is

not a trade secret and Rain & Hail’s agreements with

the customers are not exclusive. The district court also

found the restriction unduly harsh and oppressive to

Casper because the agreement was essentially a

prerequisite to obtaining the job with Rain & Hail and

because Casper had no training in other fields and

needed employment.

Rain and Hail Ins. Service, 902 F.2d at 700-01. See also

Ecolab, Inc. v. Morisette, 879 F.2d 325, 826-27 (8" Cir.

1989)(holding that the district court reasonably concluded that

Nebraska courts would not enforce an overbroad covenant,

and properly refrained from modifying the covenant in an

effort to make it reasonable).

Finally, I address the pending motion for preliminary

injunctive relief. The parties’ agreements purport to cover the

period of only one year following the termination of the

employee’s relationship with DCS. The evidence is

undisputed that the Defendants went to work for PSSI on

November 8, 2003. Thus, according to the agreements’ own

terms, the period affected by the agreements has expired, and

I conclude that the motion for preliminary injunctive relief is

moot.

DCS argues that under Ohio law, the motion would not be

moot because injunctive relief can be imposed post-judgment.

That is not the case in Nebraska, and to do so, I conclude,

would violate fundamental public policy in Nebraska. The

Nebraska Supreme Court recently reiterated that “the nature

of injunctive relief . . .” is preventative, prohibitory, or

protective, and equity usually will not issue an injunction

when the act complained of has been committed and the injury

28a

has been done.” Rath v. City of Sutton, 673 N.W.2d 869, 879

(Neb. 2004) quoting Putnam vy. Fortenberry, 589 N.W.2d

838, 842-43 (Neb. 1999).

The Court also acknowledges that DCS represents in its

brief that the motion for preliminary injunctive relief was not

scheduled until November because of “the demands upon the

Court’s docket.” I note only that from the time the motion

was filed on May 20, 2004 (Filing No. 9), until September

2004, DCS made no attempt to schedule a hearing on the

motion. By the time that the request to schedule a hearing was

made in September 2004, the first available date for the

amount of time initially soughi by the parties was November

17, 2004, which was already more than a year after the

Defendants commenced employment with PSSI. The

Plaintiffs counsel was unable to attend on that day because he

believed he would be in trial in Ohio on that day, and the

Court cancelled the hearing based on a preliminary review of

the Plaintiff's motion for preliminary injunction and the

Defendants’ motion for summary judgment.

For all the reasons stated in this Memorandum and Order,

IT IS ORDERED:

1) Plaintiff's Motion for Leave to File Supplemental

Affidavit (Filing No. 44) is granted; the Defendants’

Objection (Filing No. 45) is overruled; and the

proposed affidavit submitted therewith are deemed

part of the record on the motions;

2) Plaintiff's Motion for Preliminary Injunction (Filing

No. 9) is denied;

29a

3) Defendants’ Motion for Summary Judgment (Filing

No. 30) is granted; and

4) A separate judgment will be entered accordingly.

Dated this 14""day of December, 2004.

BY THE COURT:

s/ Laurie Smith Camp

Laurie Smith Camp

United States District Judge

30a

APPENDIX D

DCS SANITATION MANAGEMENT, INC.

AGREEMENT

In consideration of my employment by DCS

SANITATION MANAGEMENT, INC. (the “Company”), I

agree that:

1. DUTIES OF EMPLOYEE: I will work for the

Company in such capacity as it may from time to time direct,

will use my best efforts to further the interests of the

Company and to contribute ideas, information, and

improvements useful to it, and will to the best of my abilities

perform such duties as I am directed to perform.

2. SOLICITATION OF CUSTOMERS: During the term

of my employment by the Company and for a period of one

(1) year following the date of termination of employment for

any reason, I will not request or advise any customer or client

of the Company, or any entity or enterprise having business

dealings with the Company, to cancel or curtail any business

dealings with the Company. The violation of this covenant

will irreparably harm Company’s business. Accordingly, I

will pay to company as liquidated damages 25% of the gross

revenue received or receivable during the term of this

covenant from any customer or former customer of Company

as a result of the violation.

3. SOLICITATION OF EMPLOYEES: During the term

of my employment by the Company and for a period of one

3la

(1) year following the date of termination of my employment

for any reason, I will not, on behalf of myself or on behalf of

any other person, firm, or corporation, induce or attempt to

influence any employee of Company to terminate

employment. The violation of this covenant will irreparably

harm Company’s business. Accordingly, I will pay to

Company as liquidated damages for any employee who

terminates employment as a result of the violation of this

covenant an amount equal to the employee’s compensation for

the one-year period ending on the date of the employee’s

termination of employment with the Company.

4. NONCOMPETITION AFTER TERMINATION: For

a period of one (1) year following the date of termination of

employment for any reason, I will not directly or indirectly

engage in, or in any manner be concerned with or employed

by any person, firm, or corporation in competition with the

Company or engaged in providing contract cleaning services

within a radius of one-hundred (100) miles of any customer

of Company or with any customer or client of Company or

any entity or enterprise having business dealings with

Company which is then providing its own cleaning services

in-house or which requests my assistance or knowledge of

contract cleaning services to provide its own cleaning services

in-house. In the event of violation of this covenant,

Company, in addition to any other rights and remedies

available at law or otherwise, is entitled to an injunction to be

issued by a court of competent jurisdiction enjoining and

restraining employee from committing any violation of this

provision and employee hereby consents to the issuance of the

injunction.

5. CONFIDENTIAL INFORMATION: Except as

specifically authorized by Company, I will not either before

or after the termination of my employment with Company,

32a

directly or indirectly use, disseminate, disclose, or discuss

any information disclosed to or known by me as a result of or

through my relationship with Company about Company’s

processes, services, policies, procedures, prices, or customers

including without limitation customer lists, employee

information, price schedules, know-how concerning the

Company’s contract cleaning processes, and other trade

secrets employed by Company in the course of its business.

Upon termination of my employment, | will deliver to

Company all records, notebooks, and other documents

containing any information described in the proceeding

sentence, and all copies of such documents in my possession

or under my control, whether prepared by me, the Company,

or any third party. In the event of violation of this covenant,

Company, in addition to any other rights and remedies

available at law or otherwise, is entitled to an injunction to be

issues by a court of competent jurisdiction enjoining and

restraining employee from committing any violation of this

provision and employee hereby consents to the issuance of the

injunction.

6. DURATION OF EMPLOYMENT: It is specifically

understood and agreed that my employment with the

Company may be terminated by either of us at will at any

time. Nothing in this Agreement shall be construed as

creating the contract of employment for any length of time.

7. ENFORCEMENT AND INTERPRETATION: The

obligations of this Agreement shall continue beyond the

termination of employment, shall be enforceable at law and in

equity, and shall be binding on my heirs, assigns, and legal

representatives. If the obligation of any covenant is held to be

too broad to be enforced, the covenant shall be construed to

create an obligation to the full extend permitted by law.

33a

8. APPLICABLE LAW: This Agreement shall be subject

to and interpreted in accordance with the laws of Ohio.

Signed this 23 day of June, 1993

EMPLOYEE:

/s/

Employee Signature

Employee Name (printed) -

DCS SANITATION MANAGEMENT, INC.

By:/s/

Management Signature

34a

APPENDIX E

CONSTITUTIONAL PROVISIONS INVOLVED

Article I, Section 8 provides in pertinent part: “To regulate

commerce with foreign nations, and among the several states,

and with the Indian tribes;

Article I, Section 10 provides in pertinent part: “No state

shall ... pass any ... law impairing the obligation of

contracts ...”.

Article [V, Section 1 provides in pertinent part: “Full faith

and credit shall be given in each state to the public acts,

records, and judicial proceedings of every other state.”

Amendment XIV, Section 1 provides in pertinent part: “...

nor shall any state deprive any person of life, liberty, or

property, without due process of law; ...”

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.